No BSES loan, say REC & PFC, if subsidies stay

Rs 10,000-cr loan contingent upon Delhi regulator’s written word

While NTPC and the two BSES power companies, BSES Rajdhani Power and BSES Yamuna Power, continue to battle it out on around R835 crore of dues — NTPC will give its latest bill to BSES next week — Delhi’s power situation is likely to get worse as power suppliers threaten to pull the plug unless their dues are paid. Though the most voluble, NTPC is not BRPL/BYPL’s largest creditor — as of date, the BSES twins owe various creditors around R6,500 crore.

Both BRPL and BYPL are in danger of getting their R10,000-crore loan proposal rejected by the consortium of financial institutions they have approached. These include Power Finance Corporation, Rural Electrification Corporation, IDBI Bank and State Bank of India.

PFC director (finance) R Nagarajan and director (projects) AK Aggarwal met Delhi Electricity Regulatory Commission (DERC) chairman PD Sudhakar last month to ask for certain guarantees. Without these guarantees, however, PFC has told BSES the loan cannot be given. BSES’ lead banker IDBI Bank has already told the companies that a fresh loan looks difficult — the existing loans are R1,478 crore for BYPL and R1,929 crore for BRPL — until there was certainty over the future stream of payments. IDBI Bank has also raised the issue of the companies defaulting in payments to suppliers.

According to the IDBI Bank letter, written last week, it had sanctioned the loans based on a 2011 letter from DERC which had promised that BSES’ accumulated regulatory assets (see graphic) would be liquidated over a period of time and that a carrying cost would be granted — that is, till such time that the regulatory assets, R21,700 crore right now, were discharged, an interest equal to the bank rate of interest would be allowed. Regulatory assets are the difference between the cost of power supply and the amount actually paid by the consumer.

IDBI Bank has said it had also assumed — presumably, based on an Appellate Tribunal for Electricity ruling in 2011 — that the tariff would fully reflect costs after FY13.

That this is nowhere near happening is reflected in the fact that from Rs 8,232 crore in FY12, the regulatory assets for all three distribution companies in Delhi — including the Tata Group’s Tata Power Delhi Distribution — are Rs 27,192 crore at the end of FY14.

Of this, DERC has put out a schedule to amortise Rs 8,000 crore so far, but according to the IDBI Bank letter, the carrying charge allowed for this does not cover the bank interest cost. In their latest submission to DERC, the three power distribution companies have included Rs 3,339 crore as the FY14 interest or carrying costs on their cumulative regulatory assets.

PFC, REC and IDBI Bank have asked DERC to give it an assurance that there will be no more regulatory asset build up in future, that existing regulatory assets will be discharged quickly — not the eight years DERC has scheduled for Rs 8,000 crore of the regulatory assets — and that a reasonable carrying cost be allowed.

Interestingly, the three firms have pointed to something that happens each year while DERC decides on tariffs. DERC, often enough, underestimates costs.

For FY13, for instance, it approved power purchase costs of Rs 4.40 per unit for BRPL while the actual purchases took place at Rs 5.20. The figures were Rs 4.41 and Rs 5.45 for TPDDL.

In addition, in the case of BRPL/BYPL, around Rs 4,496 crore of expenditure previously disallowed by DERC needs to be factored in since the appellate tribunal has ruled in the firms’ favour.